Ethanol and Iowa

Tim Pawlenty's crusade for truth

THAT electric tingle running down your spine is the thrill of Tim Pawlenty, former governor of Minnesota, speaking truth to power. Mr Pawlenty officially announced his bid for the Republican Party presidential nomination in an outdoor speech Monday in Des Moines, and he pledged to keep it real. Can you handle the truth, America? That is the question, the challenge, Mr Pawlenty's announcement speech tacitly put to us. Will we disappoint him? Will ethanol-loving Iowans?

Mr Pawlenty's delivery was hardly electrifying, but then he works hard not to appear too exciting. Graced with the sober mien of the Minnesotan male, Mr Pawlenty calls to mind the old joke about the Norwegian farmer who loved his wife so much he told her. Conor Friedersdorf, having endured Mr Pawlenty's campaign bio, "The Courage to Stand", suggests the book might be more aptly titled "Well Adjusted Man From Loving Family Is Hardworking, Unlikely To Do Anything Terribly Objectionable". David Weigel observes that Mr Pawlenty's soporific reputation is so well-entrenched that "He's actually had to field questions about how boring he is." So Monday's big moment demanded a dramatic gesture to grab the attention of the yawning political media, and Mr Pawlenty delivered. He called for the end of ethanol subsidies in Iowa, to a crowd of Iowans, which is a bit like dropping your trousers before a congregation of octogenarian Mennonites.

"The hard truth is that there are no longer any sacred programmes," Mr Pawlenty said in the speech, titled "A time for truth".

The truth about federal energy subsidies, including federal subsidies for ethanol, is that they have to be phased out. We need to do it gradually. We need to do it fairly. But we need to do it. ...

It's not only ethanol. We need to change our approach to subsidies in all industries.

It can't be done overnight. The industry has made large investments, and it wouldn't be fair to pull the rug out from under it immediately. But we must face the truth that if we want to invite more competition, more investment, and more innovation into an industry—we need to get government out. We also need the government out of the business of handing out favours and special deals. The free market, not freebies from politicians, should decide a company's success. So, as part of a larger reform, we need to phase out subsidies across all sources of energy and all industries, including ethanol. We simply can't afford them anymore.

Sounds great to me, and true. Kudos to Mr Pawlenty for the bold move. The Wall Street Journal is impressed. "[I]n refusing to stick to the script for candidates looking to harvest votes in February's Iowa caucuses, Mr. Pawlenty has passed an early test of fortitude", the Journal editorialised. But isn't there a reason candidates stick to this script? Won't Mr Pawlenty boldly go down in anti-ethanol flames? Maybe not. According to the Des Moines Register's Jason Clayworth, the politics of the issue may be changing.

[T]he landscape has changed on the ethanol issue ... as public alarm has grown about the deficit, and key ethanol industry groups now support the idea of a subsidy phaseout.

Walt Wendland, president of the Iowa Renewable Fuels Association, released a statement Monday saying the remarks by Pawlenty, a former Minnesota governor, appear in line with Iowa Sen. Chuck Grassley's approach.

Grassley introduced a bill earlier this month that would cut the current 45-cents-a-gallon credit to 20 cents in 2012 and to 15 cents in 2013. After that and through 2016, the credit could be as high as 30 cents if the price of oil is $50 a barrel or less, but would fall as crude prices rise.

The Register does not report the Iowa Renewable Fuels Association position on Mr Grassley's proposal. However, gesturing toward Mr Pawlenty's promise to take on all manner of energy subsidy, Mr Wendland does dryly add that "Iowans look forward to Governor Pawlenty further detailing his plans to 'phase out' petroleum subsidies, perhaps in a speech in Houston, Texas."

Agribusiness giants such as Cargill and ADM, which operate ethanol processing plants across the state, aren't Iowa's only green-energy corporate welfare queens. If you're a frequent traveler down I-80 here in Iowa, you're likely to encounter eighteen-wheelers hauling colossal windmill turbines and blades from factories in West Branch, Fort Madison, and Newton to the vast, growing, and handsomely subsidised wind farms dotting central and western Iowa, and points beyond. Alternative energy subsidies are increasingly central to the economy here, and it's hard to imagine Iowa's Republican caucus-goers will be principled enough for Mr Pawlenty's verity gambit to win him many new followers. But then he probably knows that.

David Frum asks whether Mr Pawlenty's brave experiment in truth-telling is a "good way to manage expectations if he comes second or third or worse in Iowa, where Pawlenty is currently polling in single digits?" If he's going to lose Iowa anyway, Mr Frum suggests Mr Pawlenty may be "smart to blow them off and score integrity points for later." In any case, it's good to hear the truth for once, never mind the motivation.

//There's a cardinal rule of presidential primary politics: don't knock ethanol in corn-state Iowa. But that didn't stop former Gov. Tim Pawlenty from telling an audience there he'd phase-out ethanol subsidies if elected president.

"Even in Minnesota, when we faced fiscal challenges, we reduced ethanol subsidies," he said during his announcement Monday that he's running for president. "That's where we are now in Washington, but on a much, much larger scale."

Pawlenty cut state ethanol subsidies - but he left out that he also promised to pay them back later.

Pawlenty's plan didn't fly with rural lawmakers. Ultimately, he and the Legislature agreed to draw down the subsidy to 13 cents per gallon through fiscal year 2007, and pay producers the difference later on. According to a Legislative Auditor's report, the state paid out $50.5 million in so-called deficiency payments during the last biennium.

Furthermore, the program was always slated to end in 2010, so the ethanol subsidies would have halted regardless of Pawlenty's actions (though deficiency payments are still trickling out.)

Though Pawlenty wanted to cut ethanol subsidies, he also pushed to expand the state's requirement that every gallon of gasoline be blended with 10 percent ethanol. In 2005, the state approved Pawlenty's plan to require gas be mixed with 20 percent ethanol by 2013, a government mandate that's bolstered the market for the corn-based fuel.

It is true Pawlenty cut Minnesota ethanol subsidies, but he glosses over the fact that ethanol producers eventually got their money anyway.//

Pawlenty lacks a rationale for why he wants to run for president, as evidenced by his Time magazine interview when asked why he wants the office he stated: "I don't know. I wish I had a good answer for you on that." Pawlenty lacks an elevator speech for his presidency, he lacks a clear narrative for running, and he lacks a definition for his campaign. Mr. Pawlenty sounds like a politician on autotune.

I'm impressed as well. Good for Pawlenty to speak the truth on this. More generally however, I wonder if there is room to tackle more of these issues by talking about gradual phase outs. In industries that see the writing on the wall, knowing that the going will be slow rather than a sudden policy change might bring them round. Having the certainty of a slow change may be better than the year to year fear that this particular election will bring a radical policy change.

What's really being judged here is the American voter, not Mr Pawlenty. That is, if the voters can't handle the truth (and what he says is clearly true), then the problem is the voters not what Mr Pawlenty said.

While I like that the ethanol subsidy in particular is getting some increased scrutiny, I'm not so sure that I can fall in line behind the absolute sent down from on high truth that all subsidies are inherently evil. When you've got corporate entities like our oil/gas companies so thouroughly entrenched and interested only in their own battle-tested strategies for wealth generation going on in perpetuity - a little hand up for the little guy with a good idea is not always a bad thing.
I think there are significant and even fatal flaws with the ethanol subsidy, namely that ethanol in and of itself created for engine fuel from corn stock is a pretty bad idea, and most of the money is going to large agribuisness "corporate welfare queens". This subsidy is demonstratably stupid - and should have more support for its dissolution. That does not mean that the same logic applies in every situation however, and I do believe that there is a place for energy subsidies in promoting energy independance through smart use of renewable sources (solar, wind, geothermal, and to a lesser extent nuclear). Nuanced opinions are quite hard to get across to the average U.S. voter, unfortunately.

Mr Pawlenty is taking a fairly serious risk in calling for an end to ethanol subsidies because politicians who oppose subsidies don't become president. John McCain boldly called for their end. But, Mr. McCain is not president, that would be Barack Obama...a supporter of ethonal subsidies.

However, I will salute Pawlenty for trying to stand for something besides being the least objectionable candidate. It's like when Florida Sen. Marco Rubio told elderly Florida retirees that social security payments will have to eventually be cut. Talk is cheap, I agree.
However, there's no chance of actual solutions being enacted until our politicians reach the point where they're at least willing to talk about coming up with solutions.

Pawlenty being willing to talk about cutting subsidies is the first step to actually cutting subsidies.

Hate to sound like Pontius Pilate but "truth" is an awfully big word, and notoriously hard to pin down. Truth is, we hardly ever get our money's worth out of our *military* expeditions— the two World Wars being of course notable exceptions. Truth is, healthcare is too damn expensive in this country. Truth is you can't borrow in perpetuity, either on the private or on the public level.

I'd settle for "allocation of resources", or some reasonable budgetary ethic— a budget being, as someone wisely said, more a *moral* than a *monetary* statement. Once TP gets off the soapbox and opens up the ledger-books, I'll look at his ideas more closely. He seems to be an honest man.

The gist is this:
"The interest in this case is, of course, the ethanol industry, reliant on roughly $7 billion a year in subsidies. The opposing interest? Oil and gas, largely—the producers of traditional energy. Bearing this fact in mind, we might conclude that Pawlenty’s attack on ethanol subsidies is less a courageous act of political derring-do than a nod to an industry that invests millions in Republican politics "
"A path that has bags of oil and gas money sitting at the end point isn’t quite as courageous as all that."

While I'm heartened to see Pawlenty willing to take such an unpopular position, I find it equally disappointing that our political discourse has reached the point where commentators like Frum have to look for the calculation when a politician says what he believes.

@ nschomer: "I'm not so sure that I can fall in
line behind the absolute sent down from on
high truth that all subsidies are inherently
evil."
It depends on how you define subsidy. After all, a carbon tax could subsidize alternative energy as effectively as direct payments.

Interesting that you rolled with Weigel and Friedersdorf. Both of them have been pretty keen on Johnson (especially Friedersdorf), or just willing to give some column space to GOP hopeful that breaks the mold (Or in general are pretty focused on the primaries and giving space to everybody)

I agree with Frum, he's throwing everything overboard to get some sort of traction that leads to some name recognition and poll numbers. But his demeanor and tendency to follow the current makes his posturing pretty obvious. On the other hand, maybe GOP primary voters received a different signal.